The Comprehensive Real Estate Tax Threshold Raised to 1.1 Billion Won, Expanding to Top 3%... Democratic Party Unveils Multiple Easing Measures

Official Price of Apartment 1.13 Billion Won in Top 3%
Calls for Party Reform Ahead of Local Elections

[Asia Economy Reporter Park Jun-yi] The reform of real estate taxation has emerged as the biggest political issue ahead of the regime change and local elections. It has been revealed that multi-family housing with a publicly announced price of 1.1 billion KRW or more, which is subject to comprehensive real estate tax (종부세), exceeds 3% of households nationwide, leading to growing calls to revise the tax imposition criteria before the June tax imposition date.

According to data received on the 8th by Rep. Chu Kyung-ho of the People Power Party from the Ministry of Land, Infrastructure and Transport, the number of households owning multi-family housing with a publicly announced price of 1.1 billion KRW or more, subject to comprehensive real estate tax, increased from the top 2% last year to the top 3% this year. Two years ago, in 2020, households owning housing priced over 1.1 billion KRW were only in the top 1%, but this has increased by 2 percentage points over two years. Considering that the number of people subject to the tax last year was 947,000, nearly 300,000 more than the previous year, about 300,000 additional people will be subject to the tax this year under current law.

However, although the government has decided to apply last year's publicly announced prices when calculating holding tax for single-homeowners this year to ease the tax burden, this measure is temporary. The government has also applied this year's criteria to areas where publicly announced prices have fallen, which has drawn criticism for significantly undermining the consistency of the legal framework. Especially, the possibility of a comprehensive real estate tax "bomb" will increase further next year when the government's temporary measures end.

The movement toward easing real estate taxation in the political sphere is closely related to these prospects. Both ruling and opposition parties have recognized the need to appease public sentiment ahead of the new government’s inauguration and local elections.

Recently, voices calling for revision of the comprehensive real estate tax imposition criteria have grown even within the Democratic Party. On the 31st of last month, the Democratic Party’s Real Estate Task Force reportedly held a closed morning meeting to discuss ways to ease the tax. Emergency Committee member Chae Yi-bae said in a phone interview, "There was talk about lowering the tax imposition target from the top 2% to the top 1%, and also about exempting single-homeowners from the tax," adding, "As housing prices rise, more people bear the holding tax burden, so the tax law revision is being discussed with the intention of adjusting the target criteria."

Various alternatives are being proposed inside and outside the party. On the previous day, Choi Byung-chun, former deputy director of the Democratic Research Institute and a presenter at the Democratic Party’s freshman lawmakers’ meeting (Deomincho), criticized, "The comprehensive real estate tax is a ‘regime change promotion tax.’ It was inappropriate to say the top 2% based on the overall proportion when 24% of apartments in Seoul are subject to the tax." He further argued, "The comprehensive real estate tax should be abolished and integrated into property tax to adopt an Anglo-American style holding tax system, and if necessary, property tax should be raised."

In particular, it appears that the Democratic Party’s internal consensus that ‘real estate policy failure’ was the cause of their defeat in the recent presidential election has influenced this stance. Democratic Party lawmaker Hong Ki-won said in a phone interview on the day, "Lawmakers all recognize that the party lost elections after the Roh Moo-hyun administration and also in the recent election due to real estate policy," but added, "However, there are differing opinions among lawmakers on whether the cause was rising housing prices or tax issues."

In addition, alternatives to ease the comprehensive real estate tax burden are being discussed. Kim Sung-hwan, chairman of the Democratic Party’s Policy Committee, emphasized at a policy coordination meeting the previous day, "The government and the Democratic Party decided at the end of last year through enforcement ordinances to exclude unfairly taxed people from 2022 comprehensive real estate tax imposition, but there was no law to refund the tax already imposed. Therefore, with a spirit of resolving the issue, we will process the Special Tax Treatment Control Act, currently pending in the National Assembly’s Finance Committee, which was proposed by Rep. Yoon Hu-duk, to refund unfairly imposed taxes." The amendment to the Special Tax Treatment Control Act proposed by Rep. Yoon last year includes measures to exclude temporarily owning two houses due to moving or inheritance from the comprehensive real estate tax surcharge and to defer payment for elderly and low-income groups.

This content was produced with the assistance of AI translation services.